Which Stakeholders Can Currently Be Considered to Be Part of the “the Company” for the Purpose of the Director's Duty to Act in the Best Interests of the Corporation?
Company is a form of corporation and regulated by the Corporations Act. The legal significance of being as a company is it exists as a separate legal entity and dependent upon human beings to make decisions on their behalf. The person who makes or participates in making decisions that affect the whole or a substantial part of the company’s business can be defined as a director. The legal definition of director is stated under section 9 of the Corporations Act which indicates that, it is more appropriate to look at the function of the people rather than at the job title …show more content…
The only time that the director’ duties are owed to creditor is when company is insolvency and during that time, the creditor is entitled to displace the power of the directors and shareholders to deal with the company’s assets. It can be argued that it is riskless for the secured creditor who holds a charge over a part or all of the company's assets during the company’s insolvency. If the company is in financial distress, a receiver is appointed by the secured creditor to collect and look after the company’s asset in order to obtain money for them. However, it is not easy for the creditor to claim all their money back according to: firstly, the money collected has to pay the certain priority claims, including employee entitlements (such as wages, superannuation contributions and leave payments) before paying to creditor; and secondly, director does not owe directly duty of care for the interest of creditor, this might result in a less consideration of managing and taking care of the asset that is held by the creditor. Therefore, creditor who provides fund for company to operate or expand is playing a significant role to a company and their weakness position should be taken in to account and redeemed by the director’s duty and the corporate responsibilities.
In addition, duty has been referred to the judgments of the decided cases. The emergence of the issue to